Exhibit 99.1
Serena Software Reports Third Quarter Fiscal 2006 Results
SAN MATEO, Calif.--(BUSINESS WIRE)--Nov. 17, 2005--Serena
Software, Inc. (NASDAQ: SRNA), the leader in Change Governance, today
announced results for the third quarter ending October 31, 2005.
Total revenue was $64.9 million in the third quarter of fiscal
2006 and represented a 15% increase over the third quarter of fiscal
2005. Software license revenue was $22.5 million, maintenance revenue
was $34.2 million, up 24% year over year and service revenues were
$8.2 million for the third quarter of fiscal 2006. License revenue for
the third quarter from software change management was 89% of total
license revenue and 71% of total license revenue came from distributed
systems platforms.
Net income and net income per diluted share computed in accordance
with generally accepted accounting principles ("GAAP") for the third
quarter of fiscal 2006 increased to $10.5 million and $0.22 from $4.3
million and $0.09 in the same quarter a year ago.
Non-GAAP net income and net income per diluted share for the third
quarter of fiscal 2006 increased 17% and 20%, respectively, to $18.6
million and $0.36 from $15.9 million and $0.30 in the third quarter of
fiscal 2005. Included in the results for the third quarter ended
October 31, 2005 was a one time tax benefit of $1.4 million.
Non-GAAP net income and net income per share exclude amortization
of intangible assets and charges relating to the purchase accounting
adjustments for the acquisition of Merant, stock-based compensation,
amortization of acquired technology and other intangible assets,
restructuring, acquisition and other charges, and acquired in-process
research and development. For periods prior to the second quarter,
reported non-GAAP net income and net income per share also exclude the
revenue impact of the deferred maintenance write-down to fair value. A
reconciliation of non-GAAP to GAAP financial results is included in
this press release.
Total cash and equivalents, restricted cash and investments as of
October 31, 2005 was $201 million and cash flow from operations for
the third quarter was $15.8 million. Total deferred revenue was $73.9
million and days sales outstanding in the third fiscal quarter was 52
days.
"We are pleased to announce these solid results in line with our
announcement last week to be acquired by Silver Lake Partners", said
Mark Woodward, President and CEO. "We and the independent committee of
the Board of Directors believe this transaction is in the best
interest of shareholders and we look forward to partnering with Silver
Lake to focus on long term growth."
The Company also announced its financial outlook for the fourth
quarter of fiscal 2006. Fourth quarter total revenues on a GAAP basis
are expected to be in the range of $67 million to $69 million and
non-GAAP net income per diluted share is expected to be between $0.35
and $0.36. GAAP net income per diluted share is expected to be between
$0.22 and $0.23.
Third Quarter Highlights
-- Serena and Silver Lake Partners, the leading private equity
firm focused exclusively on large-scale investing in
technology and related growth industries, announced that they
have entered into a definitive agreement under which Serena
will be acquired by Silver Lake in a transaction valued at
approximately $1.2 billion. Under the terms of the agreement,
Serena stockholders will receive $24.00 in cash in exchange
for each share of stock. Any of Serena's existing $220 million
of convertible notes that are not converted to Serena common
stock prior to completion of the proposed transaction will be
exchanged for cash in an amount of $24.00 for each share of
Serena common stock into which the notes were convertible.
Douglas D. Troxel, founder of Serena and currently its
chairman and largest shareholder, will receive $24.00 per
share in cash in exchange for one-third of his shares and will
exchange the balance of his equity interest in Serena for
shares in the resulting privately held company. Serena
president and chief executive officer Mark Woodward, chief
financial officer Robert Pender, and possibly other senior
executives will also exchange a portion of their Serena equity
interests for equity interests in the resulting privately held
company.
Both the board of directors of Serena and a special committee
of the board comprised of independent directors have approved
the merger agreement and have recommended to Serena's
stockholders that they vote in favor of the transaction. In
addition, Mr. Troxel has agreed to vote his shares in favor of
the transaction.
-- Serena held its annual global user conference "Serena Xchange
2005," at the Renaissance Washington DC Hotel on September
18th-21st. The conference brought together customers, partners
and industry experts worldwide to discuss the latest IT
strategies and innovations.
-- Serena's process management solution was named 2005 Trend
Setter by KMWorld magazine. Serena TeamTrack earned accolades
as an innovative product that delivers real value to
customers.
-- Serena presented at EclipseWorld 2005, providing an overview
of the Application Lifecycle Framework (ALF) project and
highlighting the benefits of developing an integration and
interoperability framework to enable Application Lifecycle
Management (ALM) tools to effectively collaborate with one
another.
-- Serena released the latest version of Requirements Management
Solution RTM 5.6, featuring strong integration with ChangeMan,
Dimensions and TeamTrack and delivering the industry's most
complete solution for Governing Change.
-- Serena expanded its compliance solution offering with the new
Serena authorized compliance partner program providing the
industry's broadest and most flexible approach for fast and
cost effective compliance.
-- Reported that a Serena customer survey revealed that
information technology initiatives driven by Sarbanes-Oxley
compliance will increase in 2006. Serena's Change
Governance(TM) solutions allow business and IT to share a
common frame of reference, helping companies to visualize real
business benefits of a change, orchestrate responses across
change lifecycles and enforce effective business processes to
more effectively govern change.
GAAP to non-GAAP Reconciliation
Serena management evaluates and makes operating decisions using
various operating measures. These measures are generally based on the
revenues of its product, maintenance and services operations and
certain costs of these operations, such as cost of revenues, research
and development, sales and marketing and general and administrative
expenses. Such measures include non-GAAP net income and non-GAAP net
income per share. Collectively, we refer to these non-GAAP financial
measures as "non-GAAP measures." We have outlined below the type and
scope of the amounts excluded in calculating these non-GAAP measures
and the limitations on the use of these non-GAAP measures as a result
of these exclusions. These non-GAAP measures are not an alternative to
net income as calculated in accordance with GAAP. Investors and
potential investors in our securities should not rely on the use of
these non-GAAP measures as a substitute for any GAAP financial
measure. In addition, our calculation of these non-GAAP measures may
or may not be consistent with that of other companies. We strongly
urge investors and potential investors to review the reconciliations
to the comparable GAAP financial measures that are included below and
not to rely on any single financial measure to evaluate our business.
Serena views non-GAAP net income and non-GAAP earnings per share
as operating performance measures, and as such it believes that the
GAAP financial measures most directly comparable to them are net
income and net income per share, respectively. Non-GAAP net income and
net income per share differ from comparable GAAP measures in that they
exclude the amortization of intangible assets and charges relating to
the purchase accounting adjustments for the acquisition of Merant,
amortization of acquired technology and intangible assets, stock based
compensation, restructuring, acquisition and other charges.
Management believes it is useful in measuring Serena's operations
to exclude amortization of intangible assets and charges relating to
the purchase accounting adjustments for the acquisition of Merant
because these costs are primarily fixed at the time of the acquisition
and generally cannot be changed by management in the short term, or
represent significant costs not related to current operations.
Non-GAAP net income and non-GAAP earnings per share are helpful in
highlighting trends in its core business that may not otherwise be
apparent when relying solely on GAAP financial measures, because these
non-GAAP measures eliminate from net income financial items that have
less bearing on Serena's operating performance. The Merant acquisition
was a particularly large acquisition in Serena's history, and
management believes the impact of charges relating to the acquisition
can make it more difficult to evaluate the trends of Serena's
underlying business, including the performance of its products,
maintenance and services operations. Serena believes it is useful to
investors to see how management separates initial transaction costs
from its view of Serena's current and future continuing operations.
Management also believes that these non-GAAP measures facilitate
comparison of the current operating performance of the combined Serena
and Merant operations to the past performance of Serena and Merant as
separate companies, as it permits the comparison of operating results
of the separate companies, viewed together, to Serena's current
operating results without the impact of charges relating to the
acquisition process rather than the underlying operations of the two
companies.
Serena's management uses these non-GAAP measures as supplemental
financial measures to evaluate the performance of Serena's business
because, when viewed with Serena's GAAP results and the accompanying
reconciliations, it believes they provide a more complete
understanding of factors and trends affecting its business than GAAP
results alone. Serena uses these measures to make forecasting,
budgeting and operating decisions such as establishment of operating
targets, budgets and bonus compensation.
Serena communicates these non-GAAP measures to the public through
its earnings releases because we understand that they are financial
measures commonly used by analysts that cover our industry and our
investor base to evaluate our performance. For example, based on
communications with analysts and investors, Serena understands that
some analysts and investors may value companies based on a measure of
discounted future cash flows and that Serena's non-GAAP financial
measures can be useful to such analysts in performing such valuations.
Management believes that presenting these non-GAAP measures provides
investors and analysts with an additional base line for assessing the
future earnings potential of Serena. Serena prefers to allow investors
to have these supplemental measures since, with reconciliation to
GAAP; they may provide additional insight into its financial results.
Non-GAAP measures should not be considered a substitute for
measures of financial performance prepared in accordance with GAAP.
Investors are encouraged to look at GAAP results as the best measure
of financial performance. For example, amortization of acquired
technology and intangible assets are important to consider because
they may represent initial expenditures that under GAAP are reported
across future fiscal periods. Stock based compensation and
restructuring and acquisition related charges are important because
they may represent obligations of Serena that should be considered.
All of these metrics are important to financial performance generally.
Investors and potential investors are encouraged to review the
reconciliation of non-GAAP financial measures contained within this
press release with their most directly comparable GAAP financial
results.
Though Serena management finds its non-GAAP measures useful in
evaluating the performance of its business, its reliance on these
measures is limited because items excluded from such measures often
have a material effect on its net income and net income per share
calculated in accordance with GAAP. Management compensates for the
above-described limitations of using a non-GAAP measure by using these
non-GAAP measures to supplement Serena's GAAP results to provide a
more complete understanding of the factors and trends affecting our
business.
Commentary Available
A conference call to discuss the preliminary results is scheduled
for 2:00 PM Pacific time today and may be accessed live via the
Internet at www.companyboardroom.com or www.serena.com/Q306results. A
replay of the call will be available through December 1, 2005 by
dialing (800) 642-1687 or (706) 645-9291, ID# 2235564
About Serena Software, Inc.
With more than 25 years of experience in managing change
throughout the IT environment, Serena Software (NASDAQ: SRNA) provides
Change Governance software to help global 2000 organizations
visualize, orchestrate and enforce effective business processes
throughout the IT lifecycle. More than 15,000 organizations around the
world, including 98 of the Fortune 100, leverage Serena's integrated
change management framework to manage costs, ensure consistent quality
of service, mitigate business risks and ultimately profit from change.
Serena is headquartered in San Mateo, California, with offices
throughout the U.S., Europe, and Asia Pacific. For more information,
please visit www.serena.com.
This press release contains "forward-looking statements" under the
Private Securities Reform Act of 1995. There can be no assurance that
future results will be achieved, and actual results could differ
materially from forecasts and estimates. Factors that could cause or
contribute to such differences include, but are not limited to, the
percentage of license revenue typically closed at the end of each
quarter making estimation of operating results prior to the end of the
quarter extremely uncertain; weak economic conditions worldwide which
may continue to affect the overall demand for software and services,
which has resulted in and could continue to result in decreased
revenues or lower revenue growth rates; our ability to successfully
integrate our acquisition of Merant plc.; changes in revenue mix and
seasonality; dependence on revenues from our installed base; the
expansion of our international organizations; continued demand for
additional mainframe MIPS capacity; our ability to complete the
assessment of internal controls over financial reporting as of January
31, 2006, as required by Section 404 of the Sarbanes-Oxley Act, which
may impact market perception of the reliability of our internal
controls over financial reporting and thus adversely affect the market
price of our common stock; and our ability to manage our growth. We
may not be able to complete the proposed transaction on the terms
summarized above or other acceptable terms, or at all, due to a number
of factors, including the failure to obtain approval of our
stockholders, regulatory approvals or to satisfy other customary
closing conditions. Information about potential factors that could
affect the Company's financial results is included in the Company's
Form 10-K filed on April 8, 2005 and Form 10-Q filed on September 9,
2005. Serena assumes no obligation to update the forward-looking
information contained in this press release.
Trademarks
Serena, TeamTrack, ChangeMan, Comparex and StarTool are registered
trademarks of Serena Software Inc. SAFE is a trademark of Serena
Software Inc. All other products or company names mentioned are used
for identification purposes only, and may be trademarks of their
respective owners.
(C) 2005 Serena Software, Inc. All Rights Reserved.
SERENA Software, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited GAAP)
Three Months Ended Nine Months Ended
October 31, October 31,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue:
Software licenses $ 22,511 $ 22,124 $ 63,510 $ 57,379
Maintenance 34,156 27,623 101,370 68,120
Professional services 8,254 6,894 20,755 16,843
---------- ---------- ---------- ----------
Total revenue 64,921 56,641 185,635 142,342
---------- ---------- ---------- ----------
Cost of revenue:
Software licenses 846 930 2,368 2,280
Maintenance 3,327 3,145 10,014 7,859
Professional services 7,182 6,002 19,141 15,049
Amortization of
acquired technology 4,222 4,037 12,768 10,014
Stock-based compensation 8 14 29 30
---------- ---------- ---------- ----------
Total cost of revenue 15,585 14,128 44,320 35,232
---------- ---------- ---------- ----------
Gross profit 49,336 42,513 141,315 107,110
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing 18,689 17,913 53,160 45,402
Research and development 8,696 8,393 26,115 22,217
General and administrative 4,842 5,800 13,706 12,811
Stock-based compensation 587 223 1,154 463
Amortization of intangible
assets 2,560 2,835 7,956 6,771
Acquired in-process
research and development -- -- -- 10,400
Restructuring, acquisition
and other charges -- 410 -- 2,175
---------- ---------- ---------- ----------
Total operating
expenses 35,374 35,574 102,091 100,239
---------- ---------- ---------- ----------
Operating income 13,962 6,939 39,224 6,871
Interest income 1,708 702 4,198 2,745
Interest expense (825) (825) (2,475) (2,475)
Amortization of debt
issuance costs (335) (335) (1,005) (1,131)
---------- ---------- ---------- ----------
Income before income
taxes 14,510 6,481 39,942 6,010
Income taxes 3,967 2,203 12,776 5, 751
---------- ---------- ---------- ----------
Net income $ 10,543 $ 4,278 $ 27,166 $ 259
========== ========== ========== ==========
Net income per share:
Basic $ 0.26 $ 0.10 $ 0.66 $ 0.01
========== ========== ========== ==========
Diluted $ 0.22 $ 0.09 $ 0.56 $ 0.01
========== ========== ========== ==========
Weighted average shares
used in per share
calculations:
Basic 41,155 43,109 41,348 41,979
========== ========== ========== ==========
Diluted 51,690 53,432 52,079 41,979
========== ========== ========== ==========
Net income $ 10,543 $ 4,278 $ 27,166 $ 259
After tax adjustment of
convertible related
expenses 697 694 2,093 N/A
---------- ---------- ---------- ----------
Adjusted net income for
diluted net income per
share calculation $ 11,240 $ 4,972 $ 29,259 $ 259
========== ========== ========== ==========
Serena Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
October 31, January 31,
2005 2005
------------ ------------
Assets
Current assets
Cash and cash equivalents $ 98,953 $ 133,330
Restricted cash 3,300 3,300
Short-term investments 56,873 16,778
Accounts receivable, net 37,266 40,988
Deferred taxes 12,267 12,267
Prepaid expenses and other current assets 5,182 4,964
------------ ------------
Total current assets 213,841 211,627
Long-term investments 40,600 39,095
Restricted cash, non-current 1,590 3,157
Property and equipment, net 5,856 5,722
Goodwill, net 316,639 323,671
Other intangible assets, net 94,072 107,790
Other assets 3,039 4,057
------------ ------------
Total assets $ 675,637 $ 695,119
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,312 $ 3,415
Income taxes payable 29,546 27,667
Accrued expenses 23,803 26,103
Accrued interest on subordinated notes 1,238 413
Deferred revenue 63,868 63,152
------------ ------------
Total current liabilities 120,767 120,750
Deferred revenue, net of current portion 10,006 13,110
Long-term liabilities 2,140 2,660
Deferred taxes 35,552 40,983
Subordinated notes 220,000 220,000
------------ ------------
Total liabilities 388,465 397,503
Stockholders' equity:
Total stockholders' equity 287,172 297,616
------------ ------------
Total liabilities and stockholders'
equity $ 675,637 $ 695,119
============ ============
The following table reconciles the GAAP financial measures to
Non-GAAP:
Three Months Ended Nine Months Ended
October 31, October 31,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
GAAP net income $ 10,543 $ 4,278 $ 27,166 $ 259
Amortization of acquired
technology, intangible
assets and stock based
compensation 7,377 7,109 21,907 17,278
Acquired in-process
research and
development -- -- -- 10,400
Revenue impact of
deferred maintenance
write-down, net of tax -- 3,540 953 8,314
Restructuring and
acquisition charges,
net of tax -- 262 -- 1,392
---------- ---------- ---------- ----------
Non-GAAP net income 17,920 15,189 50,026 37,643
Add back:
After tax adjustment of
convertible related
expenses 697 694 2,093 2,158
---------- ---------- ---------- ----------
Non-GAAP net income for
purposes of computing
diluted EPS $ 18,617 $ 15,884 $ 52,119 $ 39,801
========== ========== ========== ==========
Diluted shares outstanding 51,690 53,432 52,079 52,529
========== ========== ========== ==========
Non-GAAP net income per
diluted share $ 0.36 $ 0.30 $ 1.00 $ 0.76
========== ========== ========== ==========
CONTACT: Serena Software, Inc.
Robert I. Pender, Jr., 650-522-6604
or
Citigate Sard Verbinnen
Victoria Hofstad, 212-687-8080